Has the Internet of Things (IoT) Arrived?

Way back in 2012, we declared 2013 the breakout year of mobile marketing and commerce – lo and behold, we were spot on as both 2013 and 2014 have proven epic for the smaller screen. Going even further out on the limb, while dramatically broadening the scope of devices, we are ready (or at least strongly leaning in this direction) to declare 2015 the year in which the Internet of Things (IoT) becomes a reality.

So, what is the Internet of Things (IoT)?

A variety of definitions and perspectives exist for the IoT, but the simple answer is that Internet of Things represents a real-world construct in which interconnectivity expands far beyond typical computing devices into the enablement of virtually all systems, services, appliances, objects as well as animals and even people.

According to Wikipedia, the IoT can refer to a wide variety of devices such as heart monitoring implants, biochip transponders on farm animals, automobiles with built-in sensors, or field operation devices that assist fire-fighters in search and rescue. Current market examples include various flavors of home automation such as smart thermostat systems and washer/dryers that utilize WiFi for remote monitoring.

How big is the IoT?

According to Gartner, there will be nearly 26 billion devices on the Internet of Things by 2020. ABI Research estimates that more than 30 billion devices will be wirelessly connected to the Internet of Things (Internet of Everything) by 2020. As per a recent survey and study done by Pew Research Internet Project, a large majority of the technology experts and engaged Internet users who responded—83 percent—agreed with the notion that the Internet/Cloud of Things, embedded and wearable computing (and the corresponding dynamic systems) will have widespread and beneficial effects by 2025. It is, as such, clear that the IoT will consist of a very large number of devices being connected to the Internet.

The payoff of this so-called Internet of Things could be staggering, especially for Bay Area tech companies, which already are jockeying to cash in on the trend. Research firm IDC predicts this shift will generate nearly $9 trillion in annual sales by 2020. By comparison, the total annual sales of the Bay Area’s 150 biggest technology companies in 2012 was $677 billion.

“This will be potentially the biggest business opportunity in the history of people,” said Janusz Bryzek, a vice president at San Jose-based Fairchild Semiconductor, who helped organize a gathering of international experts at Stanford in October to discuss the subject. “We are changing the Earth.”

How close are we to the realization of the Internet of Things?

As things ramp up for the 2015 Consumer Electronics Show (CES) in Las Vegas next week, the buzz is clearly humming around both near and long term possibilities for the IoT. At the forefront of the conversation is Samsung:

In essence, Samsung’s idea is that just about every device you have — and even products like chairs, that you don’t normally expect to see technology in — will be connected and talking to each other. On a basic level, Samsung imagines that you’ll be able to take off your headphones when you arrive home and have the music they were playing automatically start up through your speaker system. But Samsung also sees this connectivity extending outside of the home. When you go up to a digital kiosk, such as a map at a large mall, Samsung imagines that your phone might automatically connect to it and change the graphic’s language to whatever you primarily speak.

Fortunately, Samsung has already decided that all of its Internet of Things devices will be open. That means they won’t be locked within a Samsung ecosystem — something that might sound great from a business perspective, but would ultimately doom the products because consumers be required to buy all Samsung in order to receive the benefits. Instead, Samsung’s IoT products — and there are going to be a lot of them — will all be able to talk to any other Internet of Things device that wants to connect. That’s a big commitment from a company that makes everything from washers to smartphones to sensors.

“This is the digital lifestyle not just coming into concept but into practical execution,” said John Curran, managing director of communications, media and technology at the consulting firm Accenture. “The Internet of Things is touching almost every aspect of your life, and it’s bringing in a host of new companies and new partnerships.”

Examples of what is expected to be showcased at next week’s CES:

Nest will unveil a line of automated door locks, light switches and LED bulbs as well as WiFi-enabled ceiling fans controlled via its Learning Thermostat

Under Armour is expected to introduce a new line of smart sports apparel and connected workout clothing from Hexoskin will let trainers monitor athletes from afar — even from different countries.

Other devices are targeting a niche consumer base such as Tagg’s GPS-enabled pet trackers can report your pet’s location and the temperature there.

A variety of manufacturers will introduce devices built for Apple’s HomeKit home automation development platform – said devices will ultimately be controlled by iPhones and iPads

Ford’s new chief executive, Mark Fields, and Dieter Zetsche, the head of Mercedes-Benz, will give keynote addresses that focus on innovation in the auto industry, including advances in making cars smarter and eventually able to drive themselves.

The antivirus and security company Bitdefender will show off its just announced Bitdefender box, which plugs into a home network and can protect connected devices from malicious software.

A distinct commonality between Samsung’s vision and that of other players in this burgeoning ecosystem, including competitors, media members and technology analysts, is the year 2020. It would appear as though many are looking to a date 5 years from now as the true inflection point for the IoT. Today is more about exploration, innovation, building awareness, carving out a market and problem-solving…and the IoT is not without its issues.

Challenges to a global realization of the IoT

While seemingly unlimited possibilities and potential abound, not all view a proposed proliferation of connected things as imminent or even welcome down the road.

“Despite predictions of rapid growth for smart products in the near future, the Internet of Things has yet to secure a foothold in the mainstream consumer market,” notes a new exploratory case study by Affinnova, which asked consumers to evaluate more than 4 million product concept variations and identify the most desired products and functions. The company said its research sheds light “on key consumer preferences and barriers to mainstream adoption of smart products.”

One such barrier is a lack of understanding of what smart products are available and what their advantages and limitations are. While 57 percent of all consumers strongly agreed that the Internet of Things will be “just as revolutionary as the smartphone,” they don’t know how or why—92 percent told Affinnova its very difficult to pinpoint what they want from smart objects, but feel that they’ll know it when they see it.

Also holding some consumers back is unease about whether collected data would be secure and private. “While one might expect life automation to be met with fervent enthusiasm, many consumers worry that Web-enabled technologies may not be reliable decision-making proxies yet; 41 percent fear smart products could take actions that they, as individuals, would not have chosen to make on their own,” Affinnova said.

In the opinion of Steve Ranger, UK editor-in-chief of ZDNet and TechRepublic, there are plenty of environments where the IoT makes a lot of sense – sensors on industrial systems or city-wide projects, for example. These might be less glamorous than the sentient dishwasher, but are providing better value than a plant pot that tweets when the soil dries out.

There are benefits to a consumer version of the IoT, of course, especially when it comes to helping an ageing population stay independent for longer, as one example. But all of us need to think much harder about the issues involved before the technology becomes mainstream. We need to decide what we think is appropriate for our IoT devices to do, or share, long before they become commonplace.

There are obvious security questions and privacy issues around the emergence of the IoT as well, which the industry has yet to resolve. Most people just about understand that their browsing behaviour online is repacked and sold on. But the data we generate as we move about our homes could be just as telling: will your habit of binge-watching boxsets in bed or midnight junk food refrigerator raids be used against you at some point?

In our humble opinion, Steve hit on most but not all of the key concerns and challenges impeding the true mass adoption of the IoT:

Awareness and Understanding – wrapping your head around what IoT is and what it really means for consumers

Security and Privacy – controlling the flow of information (did Google drop $3.2 billion on Nest to break into home automation or was the play more about acquiring valuable information about consumer behavior?)

Relevance – companies are rushing to release innovative new interconnected products, but do they get what is really relevant to the target audience? Electronically gauging soil moisture may be important to a winery in Napa but does my wife really need an urgent alert that her potted plant is 2% below the optimal water absorption level? On the other hand, tracking our beloved Husky’s whereabouts and overall health would be hugely important to us. Heck, I even love the ability afforded by LiftMaster to check in on and control my garage doors remotely.

True Open Connectivity – will all of the “things” on the Internet be truly connected through an open protocol as envisioned by Samsung or will we be relegated to picking a proprietary platform from the likes of Apple?

So, will this be the year of the IoT?

2015 will certainly be a key building block year for the IoT and the media will certainly crank up the hype machine, but the truth is that the big splash is still years away. This is not to say, however, that very real practical applications will not be hard at work this year. Both businesses and consumers will begin to feel the impact of IoT in 2015, but not to the extent that we will be able to declare 2015 as the year that witnessed the widespread conversion of science fiction to science fact.

For an insiders perspective, look no further than the major venture capitalists. According to Inc. and CB Insights, it’s still a really nascent market. More than two thirds of all Internet of Things companies have raised early-stage funding through seed and series A rounds, with a total of 56 early stage rounds in the past two years. For the three full years from 2011 through 2013, 173 companies raised early-stage funding worth $366 million. Nearly three quarters of that funding total, however, was raised in 2013. So far, however, there have been only two notable exits: those are wearable, high-definition camera maker and Inc. 5000 company GoPro, which went public in 2014 at a value of around $3 billion, and virtual reality headset creator Oculus, which Facebook purchased in 2014 for $2 billion.

The uptick in attention and activity is definitely there in 2015 and will ultimately fuel the true realization of the IoT in years to come. Jump on early and enjoy the ride…it’s going to be an amazing thing to experience. Happy New Year!